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India top court orders probe into allegations against Adani Group

The court asks the market regulator to investigate possible deficiencies in securities laws or other regulatory disclosures by the Gautam Adani-led group.

India’s Supreme Court has asked the market regulator to investigate any shortcomings in securities laws or other regulatory disclosures by the Adani Group, which has been accused of corporate malpractice by a US-based short seller.

The Supreme Court also ordered the formation of an investor protection panel on Thursday amid sharp drops in Adani Group shares.

Indian market regulator SEBI has investigated a critical January 24 report from Hindenburg Research alleging that the Adani Group improperly used offshore tax havens and manipulated stocks. The conglomerate denies doing so.

SEBI had previously told the court that it was investigating the allegations in the Hindenburg report and market activity immediately prior to and after its publication.

The Supreme Court asked SEBI to check “whether there has been a failure to disclose related party transactions” and “whether there has been manipulation of stock prices in violation of existing laws”.

The ruling was announced by a three-judge bench, headed by Chief Justice of India DY Chandrachud, which heard several public interest lawsuits over losses suffered by investors as a result of the IPO triggered by the Hindenburg report.

Seven publicly traded companies of the Adani Group have lost about $135 billion in value since the report was published.

Billionaire Gautam Adani welcomed the Supreme Court order. “It will bring finality in a time-bound way. The truth will prevail,” he said in a post on Twitter.

Hindenburg Research said in its report that it had identified numerous “undisclosed related party transactions” by both public and private Adani companies, allegedly in violation of Indian disclosure laws.

In his rebuttal, Adani said that “all related party transactions are at arm’s length, duly disclosed and reviewed/audited by statutory independent auditors”.

The court also formed an expert panel led by a retired Supreme Court judge to examine how to strengthen investor protection mechanisms.

The six-member panel, which will report within two months, will include former Chairman of the State Bank of India OP Bhatt and prominent banker KV Kamath.

It has been asked “to provide a general assessment of the situation,” Chandrachud said.

Adani has been trying to appease investors and held a fixed income roadshow in Singapore and Hong Kong this week. The group has told creditors, according to sources, that it received a $3 billion loan from a sovereign wealth fund.

In addition to investigating allegations against Adani, the expert committee must propose measures to improve regulatory oversight and investor protection.

Adani Enterprises last month canceled a share offering intended to raise $2.5 billion after Hindenburg released his report and the share price plummeted.

Opposition parties blocked parliamentary proceedings last month demanding an investigation into the business dealings of Gautam Adani, who is said to have close ties to Prime Minister Narendra Modi.